A federal district court in Nevada has ruled in favor of the SBA, holding that the SBA could limit the EIDL grants to $1,000 per employee. There are two other lawsuits against the SBA still pending. Find out the details in this video!

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Video Time Stamps:

3:01 – Florida SBA EIDL lawsuit update
4:49 – Letters from Congress to the SBA
8:13 – Nevada SBA EIDL lawsuit
11:42 – Arkansas SBA EIDL lawsuit

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Applicants for Economic Injury Disaster Loan and Grant (the “EIDL”) program brought at least three lawsuits in federal courts in Florida, Arkansas, and Nevada, alleging that the Small Business Administration (the “SBA”) violated the CARES Act by impermissibly limiting EIDL grants/loan advances to $1,000 per employee per applicant, instead of paying applicants up to $10,000 per applicant (based on the applicant’s request) as required by the law. The applicants also argue in these lawsuits that the SBA was required to provide these grants within three days of application.

The Nevada court has now ruled that the CARES Act did not clearly take away the SBA Administrator’s discretion to limit the grants as she deemed appropriate. The Nevada court held that the relevant section of the CARES Act merely says what an applicant can do (i.e. the applicant “may” request a grant up to $10,000 and request to receive it within three days), but it does not require the SBA to actually comply with that request. The court also held that because — in the court’s view — this language of the CARES Act was clear on its face, the court did not need to consider (and in fact refused to consider) any extrinsic evidence, including the letters members of Congress sent to the SBA chastising it for its incorrect interpretation.

The authors of some of the letters from congress criticizing the SBA and Administrator Carranza include members of the Senate’s Committee on Small Business who were responsible for drafting the very language of the CARES Act that is at issue in the lawsuits. These members include Senator Benjamin Cardin, Senator Christopher Coons, Senator Jeanne Shaheen, Senator Jacky Rosen, Senator Edward Markey, and Senator Tammy Duckworth.

With regard to the Florida lawsuit and the Arkansas lawsuits, the courts in both of those cases have set briefing schedules for the parties to submit their written arguments to those courts within the next week or so. The Florida court is also going to hold an oral argument on the preliminary injunction motion pending in that case on June 12, 2020.

While the Nevada court’s decision is not binding on the Florida and the Arkansas courts (or any other courts around the country), it is likely to be used by the U.S. Attorney Office as persuasive authority in its attempt to get dismissals of both cases. It remains to be seen whether those courts will side with the Nevada court or whether they will chart their own path.

One thing is clear, the best chance that the EIDL applicants have in these cases is to convince the courts that the language of the CARES Act is ambiguous and that the courts should look to other evidence/information to determine what Congress intended. If they can do that and they can get the courts to consider the numerous letters from Congress, as well as the record of the Congressional debates, they may have a chance of getting a favorable holding.